News Life and Health23 Jan 2023

Japan:Insurance giant's in-force business to support core operating profit over the long term

| 23 Jan 2023

Nippon Life Insurance Company (Nissay) has a track record of consistently strong operating performance, mainly supported by a stable trend of core operating profit and a five-year average return-on-equity of 7.2% (fiscal years 2017-2021), as calculated based on comprehensive income, AM Best has pointed out.

The company’s operating performance remained consistent and resilient amid the COVID-19 pandemic with its core operating profit improving on an annual basis from JPY691bn ($5.3bn) to JPY872bn for the fiscal year ended 31 March 2022 (FY2021). The company’s payment of benefits was adversely affected by a new wave of COVID-19 infections in Japan over the near term.

However, AM Best expects that the impact of COVID-19-related claims will moderate significantly from October 2022, following the Japanese government’s updated guidelines and the company’s stable book of in-force business, which will continue to support its core operating profit over the long term.

Ratings affirmed

AM Best has affirmed Nissay's Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” (Superior). The outlook of these credit ratings is 'Stable'.

The ratings of Nissay reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.

The 'Stable' outlooks reflect AM Best’s expectation that Nissay will maintain its overall balance sheet strength assessment, supported by its risk-adjusted capitalisation at the strongest level, as measured by BCAR. Ongoing strategic initiatives implemented by management and a diversified product portfolio are also expected to support Nissay’s consistent operating performance over the intermediate term.

Nissay’s balance sheet strength assessment mainly reflects its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The assessment is also supported by the company’s low financial leverage. Although Nissay is exposed to moderate equity risk from its stock investment portfolio, its sizable available capital, established reputation in Japan and abroad, and good access to debt markets should allow it to withstand such risk.

Business profile

Nissay is one of Japan’s leading life insurance companies, with a market share of approximately 19% in terms of premium income. The company’s sales representative base remains strong, and it is making efforts to diversify its distribution channels further to achieve revenue growth and strengthen profitability in its domestic market. The company continues to have modest geographic diversification, with its relatively small operations in other Asia-Pacific countries and the US.


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